Eroad Limited · NZX:ERD
Eroad — Investor Day (March 2023)
36 slides from Eroad's investor day presentation, Mar 20, 2023
Slide 1: Market Release: Investor Day Presentation
For personal use only Market Release 20 March 2023 Investor Day Presentation Transportation technology services company EROAD Limited (NZX/ASX: ERD), with its purpose of safer and more sustainable roads, today provides a copy of the Investor Day Presentation ahead of the Investor Day on 21 March 202
Slide 2: EROAD Investor Day 21 March 2023
For personal use only EROAD INVESTOR DAY 21 March 2023
Slide 3: EROAD Investor Day Attendees
EROAD INVESTOR DAY ATTENDEES For personal use only CHAIR – GRAHAM STUART CEO – MARK HEINE - EROAD Chair since August 2018 and Director - CEO of EROAD since April 2022 (General Counsel since January 2018 and Company Secretary since 2015) - Previously CEO of Sealord Group - Previously at Bell Gully an
Slide 4: Contents
CONTENTS For personal use only Trading Update & Guidance Key Opportunities 1. Customer Mix 2. R&D Payback 3. North America Market Fit 4. Unit Economics EROAD Tomorrow • Repositioning to Generate Cash & Drive Growth • Strategy Timeframe • Financial Outlook • Key Metrics • Positioned for market growth
Slide 5: Welcome & Opening Remarks
For personal use only 01 WELCOME & OPENING REMARKS GRAHAM STUART (CHAIR) 4
Slide 6: Trading Update & Guidance
TRADING UPDATE & GUIDANCE For personal use only Trading Update • New Zealand & Australia continue to deliver solid growth with new client wins (e.g. Fonterra) • Focus on business optimisation and cost efficiencies driving demand in NA but longer sales cycles prevailing Guidance Reiterated FY23 Guida
Slide 7: FY23 Recap
FY23 RECAP • Difficult market conditions over the last year impacting operations For personal use only including: North America customers facing macro-economic challenges resulting in delayed customer decision making and EROAD facing increased competition broadly • Strategic review announced in Nove
Slide 8: Key Opportunities
For personal use only 02 KEY OPPORTUNITIES MARK HEINE (CEO) MARGARET DELANY (CFO) AKINYEMI KOYI (PRESIDENT NORTH AMERICA & CHIEF INNOVATION OFFICER) 7
Slide 9: Integrated Solutions Overview
INTEGRATED SOLUTIONS OVERVIEW EROAD PROVIDES A COMPLETE CONNECTED NETWORK THAT CONNECTS WITH CUSTOMERS’ SYSTEMS, ALLOWING THEM TO TURN DISPARATE DATA INTO ACTION For personal use only COMPLIANCE AND ASSURANCE HEALTH & SAFETY PRODUCTIVITY SUSTAINABILITY • RUC and fuel tax compliance • Driver behaviou
Slide 10: Key Market Size
KEY MARKET SIZE OUR SOLUTIONS ADDRESS A LARGE, AND FAST-GROWING MARKET OPPORTUNITY For personal use only NORTH AMERICA NEW ZEALAND AUSTRALIA One of the largest markets with Cash generative geography with Opportunity to leverage leading significant long-term growth leading market position in New Zeal
Slide 11: Optimising the Business Model
OPTIMISING THE BUSINESS MODEL THE STRATEGIC REVIEW IDENTIFIED 4 OPPORTUNITIES FOR OPTIMISATION, WE HAVE A CLEAR PATH TO GENERATE POSITIVE FREE CASH FLOW + DRIVE GROWTH For personal use only STRATEGIC REVIEW IDENTIFIED 4 KEY OPPORTUNITIES REPOSITIONING TO GENERATE CASH & DRIVE GROWTH TURN AROUND THE
Slide 12: Opportunity #1: Customer Mix
For personal use only OPPORTUNITY #1 CUSTOMER MIX Customer mix necessitates a segmented service model • Challenge #1 11
Slide 13: Customer Mix: Diverse Customer Base
CUSTOMER MIX DIVERSE CUSTOMER BASE ACROSS FLEET SIZE AND INDUSTRY HAS BEEN INSTRUMENTAL TO GROWTH TO DATE For personal use only CUSTOMER CONCENTRATION (2022) TOP 10 CUSTOMERS (2022) DIVERSE FY22A CUSTOMER BASE Customer Geography recurring revenue 35% New Zealand / Australia Customer 1 North America
Slide 14: Customer Mix: Segmented Service Model
CUSTOMER MIX SHIFTING TO A SEGMENTED SERVICE MODEL TO MANAGE THE LONG TAIL WILL REDUCE COST TO SERVE & INCREASE PROFITABILITY For personal use only EROAD CUSTOMER BASE BY REVENUE CONTRIBUTION LONG CUSTOMER TAIL Enterprise NZ$100k ARR ~160 51% of revenue • EROAD’s total customer base is weighted to s
Slide 15: Customer Mix: Retention of Blue-Chip Customers
CUSTOMER MIX RETENTION OF REFERENCEABLE BLUE-CHIP CUSTOMERS ENABLE A TARGETED ENTERPRISE PIPELINE WITH HIGH CONFIDENCE For personal use only KEY ENTERPRISE CUSTOMERS CUSTOMER RELATIONSHIPS NORTH AMERICA NEW ZEALAND & AUSTRALIA Fleet size of 1,000 – 11,000+ Fleet size of 500 - 6,000+ Average tenure o
Slide 16: Opportunity #2: R&D Payback
For personal use only OPPORTUNITY #2 R&D PAYBACK R&D payback can improve through faster speed to market and prioritised projects • Challenge #1 15
Slide 17: R&D Payback
R&D PAYBACK SPEND WILL REDUCE AS A % OF REVENUE; PAYBACK WILL IMPROVE AS SYNERGIES REALISED, PROCESS INEFFICIENCIES REMOVED, AND STRONGER PRIORITISATION For personal use only R&D RE-FOCUSING INITIATIVES R&D INVESTMENT (% OF REVENUE), NZ$M Optimise admin spend: • R&D spend is expected to reduce to ap
Slide 18: Opportunity #3: North American Market Fit
OPPORTUNITY #3 NORTH For personal use only AMERICAN MARKET FIT North American business requires differentiated product offering to deliver to large enterprise market • Challenge #1 17
Slide 19: North American Market Fit: Solution Gaps
NORTH AMERICAN MARKET FIT WITH A STRONG DIFFERENTIATED SAFETY SOLUTION IN NA, R&D INVESTMENT WILL FOCUS ON OUR SOLUTION GAPS REQUIRED BY ENTERPRISE CUSTOMERS For personal use only NORTH AMERICA PRODUCTS Market: Must have / Current EROAD Feature set Inclusions Ability to differentiate solution Core t
Slide 20: North American Market Fit: Three Transportation Segments
NORTH AMERICAN MARKET FIT DURABLE GROWTH IS ACHIEVABLE THROUGH TARGETING 3 TRANSPORTATION SEGMENTS WITH LARGE SERVICEABLE OBTAINABLE MARKETS WHERE EROAD IS STRONGLY POSITIONED For personal use only NORTH AMERICA OPPORTUNITY Transportation Construction Segments where EROAD Less than truckload plays R
Slide 21: OEM Hardware Environment
OEM HARDWARE ENVIRONMENT OEM INTEGRATION REMAINS A KEY FOCUS AND WILL BE INCORPORATED INTO OUR SOLUTION WELL BEFORE OEM HARDWARE BECOMES A SIGNIFICANT THREAT For personal use only Users of telematics are provided with two options to connect with Original Equipment Manufacturers (‘OEM’) o OEM telemat
Slide 22: Opportunity #4: Unit Economics
OPPORTUNITY #4 For personal use only UNIT ECONOMICS Unit Economics improve as cost- out initiatives are realised and customer growth occurs • Challenge #1 21
Slide 23: Unit Economics: Hardware Replacement Headwind
UNIT ECONOMICS HARDWARE REPLACEMENT HAS BEEN A HEADWIND TO UNIT ECONOMICS, TECHNOLOGICAL OBSOLESCENCE AND CUSTOMER CHURN INCREASE CAPITAL For personal use only OUTFLOWS AND REDUCE LIFETIME VALUE ILLUSTRATIVE CUSTOMER LIFETIME VALUE Profit Customer Breakeven Acquisition (CAC payback) Point Customer A
Slide 24: Unit Economics Improve with Growth and Cost-Out
UNIT ECONOMICS UNIT ECONOMICS IMPROVE AS EROAD ACHIEVES CUSTOMER GROWTH AND REALISES COST-OUT INITIATIVES For personal use only NET CASH FLOW PROFILE OVER TIME, NZ$ FIXED COST BREAK-EVEN AS A FUNCTION OF UNITS (FY22) Per unit, Assuming 200k units Units in k, costs in NZ$m Illustrative example assume
Slide 25: 3G Hardware End-of-Life and Accelerated Replacement
UNIT ECONOMICS 3G HARDWARE END-OF-LIFE IS DICTATED BY NETWORK SHUTDOWNS, RESULTING IN UNIT REPLACEMENT BEING BROUGHT FORWARD AND SECURING NZ CASH FLOWS For personal use only ACCELERATED 3G REPLACEMENT PROGRAM • Vodafone New Zealand will turn off its 3G service in August 2024 on which ~35% of our tot
Slide 26: EROAD Tomorrow
For personal use only 03 EROAD TOMORROW MARK HEINE (CEO) MARGARET DELANY (CFO) AKINYEMI KOYI (PRESIDENT NORTH AMERICA & CHIEF INNOVATION OFFICER) 25
Slide 27: Repositioning to Generate Cash & Drive Growth
REPOSITIONING TO GENERATE CASH & DRIVE GROWTH RIGHT-SIZING THE FOUNDATIONS TODAY ALLOWS EROAD TO SCALE EFFICIENTLY, RESPOND TO MARKET DRIVERS QUICKER AND BE MORE AGILE TO CUSTOMER NEEDS For personal use only TURN AROUND Drive cash and efficiency • Tailoring of service levels to drive performance foc
Slide 28: Strategy Timeframe
STRATEGY TIMEFRAME OPTIMISING BUSINESS OPERATIONS UNDERWAY, AFTER WHICH RESOURCES CAN BE DEPLOYED TO ACHIEVE SCALEABLE GROWTH For personal use only Turnaround the core Future Growth Approach Corporate overhead reduction Efficiency in ANZ / Growth in NA Growth in NA Verticals Timing FY23 FY24 ~3-5 ye
Slide 29: Revenue Bridge
REVENUE BRIDGE REVENUE GROWTH ACHIEVED THROUGH CUSTOMERS’ SCALING UP AND INCREASED MULTI-PRODUCT ADOPTION For personal use only TOPLINE GROWTH BRIDGE Revenue, NZ$m LONG TERM GROWTH DRIVERS – NORTH AMERICA North America Expected to be Expected to be in-line with • Focus on Enterprise customers in-lin
Slide 30: Cost-Out Program
COST-OUT PROGRAM ALREADY HALFWAY THROUGH COST-OUT PROGRAM, WITH TARGETED PLANS FOR THE REMAINING $10M For personal use only Completed $10m cost-out Targeted $10m cost-out • Right-sized personnel • Product simplification • Approximately 75 FTE removed • Consolidate product suite and eliminate • Reduc
Slide 31: Free Cash Flow Bridge
FREE CASH FLOW BRIDGE MANAGEMENT IS FOCUSED ON BEING FCF NEUTRAL BY FY25 AND FCF POSITIVE BY FY26 WITHIN EXISTING CREDIT FACILITY LIMITS For personal use only In addition to operating earnings growing in line with market and FORECAST FREE CASH FLOW TO FIRM BRIDGE, NZ$M cost inflation, a number of in
Slide 32: Key Metrics
KEY METRICS FOCUSED STRATEGY PROVIDES CONFIDENCE IN OUR OUTLOOK TARGETS For personal use only Goal Metric FY20 FY21 FY22 FY26 Commentary 11% - 13% Growth in-line AMRR* 84.0 88.4 134.6 CAGR with market In-line with Churn 5% 5% 7% 5% - 7% SaaS historical trends Quality Increased weighting to Average L
Slide 33: Positioned for Market Growth
For personal use only POSITIONED FOR MARKET GROWTH The strategic shift to operate at scale positions EROAD well to translate momentum into durable growth for the long-term • Challenge #1 32
Slide 34: Key Market Drivers
KEY MARKET DRIVERS EROAD’S CURRENT STRATEGY ALIGNS US WITH SIGNIFICANT MOMENTUM TO CAPITALISE ON TAILWINDS AND AVOID POTENTIAL NEGATIVE TRENDS For personal use only KEY TRENDS EROAD FOCUS Demand for advanced workflow-based 1 TELEMATICS INDUSTRY solutions Demand for bespoke/custom workflow solutions
Slide 35: Platform Demonstration
For personal use only PLATFORM DEMONSTRATION
Slide 36: Summary and Q&A
For personal use only 04 SUMMARY AND Q&A 35